Jon Moeller: Robert, as Andre suggested, I’ll just provide a little bit of additional color on China. Having spent a fair amount of my career involved in that market and having just spent almost a full week there, in digesting the Q2 numbers, the P&G numbers in China, you have to think about a couple things. One is SK-II, which, just for clarity for everybody, is really driven by an anti-Japanese brand sentiment which Andre described. Our opening remarks that’s related to the release of wastewater from the Fukushima nuclear facility, and we’ve had not identical but similar consumer sentiment dynamics in the past as relates to this brand and as relates to the relationship between those two countries. And it has always resolved itself with SK-II moving to higher heights.
So, if you look at the decline in China on the quarter, on our business, I don’t know the exact number, but basically think of it as 50% of that being the dynamic I just described and 50% of it being the market dynamics. The second thing that Andre referred to is important to understand as well. The heaviest purchase period historically in China was in November. I’m talking years past. And that was always a little bit disconcerting for us because a disproportionate amount of product moved during Double Eleven. It filled consumer pantries. It filled some retailer pantries, inventories and warehouses. It often moved at heavily discounted prices. The amount of movement during that period this year was much lower. And as Andre said, we view that as a good thing.
And it’s a temporary impact, a quarterly impact, a Q2 impact on the indices, but it moves us into a healthier position. If you think about the medium to longer term, Andre mentioned the expected addition of 200 million middle income consumers to China’s population, that’s very encouraging. Also, I mentioned I was in homes, I was in stores, I was with our retail partners. They remain encouraged about the future of China. I was talking to our organization at the end of the trip, our organization in China, and I told them I had never seen as much alignment in the market between our intentions and our strategy, our retailers intention and their strategy and the government’s intention and their strategy, all focused on what’s being referred to as quality market growth.
As Andre suggested, that’s a very good thing for us. We can play very effectively and help with that agenda, help society on a parallel path. And so, you put all that together, and I agree with Andre, and I said it earlier, I think the growth potential here remains intact. There are some specific items that exacerbate the trend that you’re seeing on the quarter, but I expect this will continue to be a source of both growth and value creation for P&G. Sorry for the long answer, but I think it’s important.
Operator: The next question comes from Steve Powers of Deutsche Bank. Please go ahead.
Steve Powers: Thanks, and good morning. At the risk of provoking another long answer, I guess what struck me this morning is just the confidence and front footedness, if that’s a word, in both of your comments this morning, and I think, Jon, your strategic perspective struck me as particularly assertive. I say that in the context on the outside, I think faced with some of the market challenges, you’ve called out China, the Middle east, etc., this quarter, concerns grow that P&G is likely to be thrown off course or maybe getting complacent. And I guess my question is, why is that wrong? And what to you are the keys to keeping the organization’s eye on the ball, focused, grounded and executing on all those strategic pillars that you went through.
Jon Moeller: Thanks, Steve. I want to step back first. We do face a lot of challenges in the world that we all live in, and those have impacted our business. But stepping back probably five years, the level of challenge has always existed, whether it was COVID, whether it was the highest consumer inflation in 40 years, whether it was the 50% reduction, 50 in our profit over two years as a result of commodities, foreign exchange, and transportation costs, and this organization overcame all of that. They’ve overcome the challenges we faced in the last quarter, and that gives me a huge amount of confidence that we have the ability, the skills, the strategy and the agility to continue to meet challenges, face first, and work through them in ways that are constructive for consumers, for customers, for employees, for society, and for share owners.
We talk a lot internally about the complacency and the evils associated with it. So, it’s front and center in our thought process. I have a couple of kind of trite sayings that I use in communicating with the organization, and one of them is that complacency kills. You don’t see a complacent organization when you’re looking at the breadth of growth that they’re delivering. When you’re looking at the continued, after a decade, continued work on productivity, yielding the kind of margin progress that we saw this quarter, you don’t see it as they reinvest that into growing markets and to growing household penetration and shares. We’re not immune to it, so you’re right to raise it. But I feel, as you said, I feel the organization, not just myself, are very much on their front foot as they move to take advantage of the opportunities that we see in front of us.
I’ve frankly never seen as many opportunities. Now, there’s a lot of work associated with capitalizing on those opportunities, and there will be lots of challenges and forces that will be working against us in that endeavor. But the accomplishments of the midterm past, the most recent past, the reflection of the work that the organization is doing all the way down the income statement and the innovation progress that I’m seeing not only in market or coming to market, but as we review the pipelines across each of the categories also give me a good degree of confidence.
Operator: The next question comes from Filippo Falorni of Citi. Please go ahead.
Filippo Falorni: Hi, good morning, everyone. Jon, I wanted to go back to China. You mentioned clearly that there was an impact from the cycling of the eleven-eleven shipments. And can you give us some sense, like how down was China and SK-II during that period, and maybe some of the axial rate coming out of December that gives you some confidence in the improvement in the country in the second half. Thank you.
Jon Moeller: I apologize. I honestly don’t operate at that level of data aggregation. So, I don’t have the answer with any degree of specificity, but I know the impact was there. I know it’s a good thing for us long term, and apologize, but I’m just going to leave it there.
Operator: The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead.
